Thinking about buying a home in 2015? If you're like some buyers, you won't be able to swing the purchase without some financial help from family or friends. Those generous enough may make you an outright gift rather than a loan. If so, however, you'll want to understand the IRS gift tax exclusion. That’s the maximum that someone can give to you, individually, before having to file a federal gift tax return.
The exclusion amount was $14,000 in 2014, and will remain unchanged for 2015, according to the IRS'S "What's New: Estate and Gift Tax" page.
But realize that your friends and family can still give you larger gifts, if they're so inclined. For starters, if you'll be getting a gift from parents, each of them can separately give you $14,000 without having to file a tax return. In addition, if you’re buying the house with a partner, spouse, or someone else, and your parents are feeling exceptionally generous, each one can separately give your cobuyer $14,000. (It doesn’t matter whether there’s any family relationship between giver and recipient – although gifts between spouses need not be reported at all.)
But even without these possibilities, an individual can give you more than $14,000. There's no penalty or immediate tax on that amount -- it's just that the giver will have to file a return with the IRS indicating that the gift occurred. The gift will become financially significant only upon the giver’s death, at which time it will be figured into calculations of estate tax, as described in “The Federal Gift Tax.”
A final note: In case your bank or institutional lender wants proof that the gift is truly a gift and not a loan, it will help to have a letter from the giver confirming his. Nolo provides a free “Sample Gift Letter” for just this purpose.